PRESS RELEASE

Trade risks intensive even as steel demand growth flattens

Brussels, 19 July 2018 – The EU steel market began 2018 on a relatively strong footing, supportedby the ongoing economic recovery and because of improved business conditions in steel-usingsectors. However, imports continued to increase from already high levels in 2017. Over theforecast period 2018-2019 steel demand is expected to flatten as the growth of final steel useslows down to a more sustainable rate of expansion. The recent rise in protectionist trademeasures is deepening uncertainty and could result in the market situation diverging from thebase-case scenario.

“The latest data confirms the severe impact the US Section 232 tariffs are having by deflectingimports into the EU – with surges across almost all product lines”, said Axel Eggert, DirectorGeneral of the European Steel Association (EUROFER). “This surge is occurring at the same time asgrowth predictions are being revised onto flatter trajectories. We cannot risk the ongoing recoverybeing put at stake– and welcome the recent EU safeguard in its efforts to stabilise the sector”.

EU steel market overview

EU28 apparent steel consumption rose by 3% year-on-year in the first quarter of 2018. Robust realsteel consumption and the seasonal restocking in this period explain this growth.Domestic deliveries to the EU market rose by 2.1% year-on-year to 37 million tonnes in the firstquarter. Third country imports rose by 9.8% to 10 million tonnes compared to the already elevatedimport level registered in the same period of 2017. As a result, imports reached the highestquarterly level since the third quarter of 2007. This confirms that the volume effects of anti-dumping measures imposed by the European Commission over the course of 2017 faded out rapidlydue to other third country suppliers filling the gap left by the countries which had duties applied tothem.

The EU market witnessed a seasonal inventory build-up in the distribution chain and at the end-userstage, which is common in the first quarter of the year. The extent of the increase in steel stockswas lower than in the same period of 2017, which suggests a rather high stock rotation and robustlevels of distribution chain sales.

EU steel demand prospects are in principle rather positive. Current expectations for the economicand business climate support the expectation of continued growth in apparent steel consumptionin 2018 and 2019. However, international steel trade fundamentals have become highly uncertainand more difficult to foresee. The sharp rise in imports of specific steel product from some thirdcountries confirms that steel trade distortions remain a threat, which could be exacerbated bytrade deflection resulting from the Section 232 tariffs applied by the Trump administration.

EU steel-using sectors

In the first quarter of 2018 all steel-using sectors in the EU – except steel tube manufacturing –registered an increase in production activity. At the country level, almost all reporting countriesreported higher activity levels, with some of them – Sweden, Austria and Poland – registeringdouble-digit growth in total production activity. Main exception was Germany owing to thenegative impact of a contraction in tube output.

Production activity in EU steel-using sectors is forecast to grow by 2.8% in 2018 and by 1.9% in 2019.The outlook for the production trend in the EU steel-using sectors for 2018 and 2019 is favourableoverall. Economic conditions look set to remain supportive to growth; domestic demand will bethe key driver of growth over this period. However, the recent rise in protectionism is fuellinguncertainty and could result in important growth factors, such as business confidence andinvestment, deviating from the expected scenarios.

Output in EU steel-using sectors is forecast to grow by 3.1% in 2018 and by 1.9% in 2019.

EU economic context

In the first quarter of 2018 economic growth in the EU slowed down to 0.4% quarter-on-quarter,compared with 0.7% growth in the final quarter of 2017. The growth moderation was to a largeextent the result of a weaker net trade performance as EU exporters began to experience thenegative impact of the slowing global economy and the strength of the euro versus other majorcurrencies.

Confidence levels stabilising after the first quarter correction remains consistent with solid – albeitflattening growth – in the future. However, EU economic growth this year and next will be drivenmainly by domestic demand. The contribution of net exports to economic growth in the EU looksset to diminish because of trade tensions between the US and its trade counterparts flaring up,which could have a potentially negative impact on global economic growth and international trade.This could also negatively impact the investment outlook.

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EUROFER ECONOMIC AND STEEL MARKET OUTLOOK THIRD QUARTER, 2018

The EUROFER Economic and Steel Market Outlook: third quarter, 2018 can be found: here

ABOUT THE EUROPEAN STEEL ASSOCIATION (EUROFER)

EUROFER AISBL is located in Brussels and was founded in 1976. It represents the entirety of steel production in the European Union. EUROFER members are steel companies and national steel federations throughout the EU. The major steel companies and national steel federations in Switzerland and Turkey are associate members.

ABOUT THE EUROPEAN STEEL INDUSTRY

The European steel industry is a world leader in innovation and environmental sustainability. It has a turnover of around €170 billion and directly employs 320,000 highly-skilled people, producing on average 160 million tonnes of steel per year. More than 500 steel production sites across 22 EU Member States provide direct and indirect employment to millions more European citizens. Closely integrated with Europe’s manufacturing and construction industries, steel is the backbone for development, growth and employment in Europe.

Steel is the most versatile industrial material in the world. The thousands of different grades and types of steel developed by the industry make the modern world possible. Steel is 100% recyclable and therefore is a fundamental part of the circular economy. As a basic engineering material, steel is also an essential factor in the development and deployment of innovative, CO2-mitigating technologies, improving resource efficiency and fostering sustainable development in Europe.